Patents, policies and more

Dr Swati Piramal, Director-Strategic Alliances, Nicholas Piramal voices her opinions on the company and its alliances, government policies and R&D; in conversation with Katya Naidu.

NPIL recently clinched a drug development deal with Eli Lilly. What can you tell us about the same?

The deal with Eli Lilly is very unique as it is a multi billion Dollar big pharma out-licensing a molecule to an Indian company. We structured the whole arrangement like a relay race. They have finished the first part of the development of the drug, they have brought it up to the optimisation of the lead and licensed it to us. We will finish toxicology and Phase I and II and they have a call back option. It's a relay race where we take the middle part and we hand it over back to them. They do Phase III trials all over the world and market the drug.

But since we take part in the development process we get royalty on the final sale and we also get milestone payments. It is a very interesting way of improving the speed and lowering the cost of drug development. There are a whole lot of advantages that Lilly has got by partnering with a company like Nicholas. We also have advantages that we get in-licensing of a world class molecule.

It is different from what most of the companies are doing. You either out-license or you in-license but to do something like this, which is a true partnership where the partner shares the IPR, the risks and the rewards. Of course the model will only work if it is executed well.

NPIL has embraced the partnership strategy and has a record number of alliances. What is the reason behind this?

We have had the best record of partnerships since ten years. Not many people realise this but we have always been a leader in 'thinking' about alliances and partnerships. We have always forged strategic partnerships on the long term. We were efficient at execution maintained the partnership beyond the time in which it was signed.

Our partnership with Allergan was voted as one the three best partnerships in the world. In this case, we started with a JV in India for the domestic market. But now, we export Allergan products manufactured in India to the rest of Asia. We also have an API formulation facility in Hyderabad and we are exploring research partnerships. It is moving up that value chain and that's why it's been a very successful partnership.

Unlike all other Indian companies, NPIL has not ventured much into generics? Why is it so?

We believe that the generics strategy is not sustainable; it's a short term reaping. There is a big market for generics and everyone wants a piece of the market. But things are becoming much more difficult. First they used to allow one company for six month exclusivity after a drug goes off patent. Today, they allow whoever applies on the first day. Margins crazily go down and you build up your whole manufacturing, marketing and distribution for just six months. They have to invest millions of Dollars into USFDA approvals all of it lasts for just six months and then later things start to fall. It's a shifting of sands. That is why we feel that its not a sustainable business and we feel that betting on research is slower but it's a more sustainable because we have a patent for 20 years. Ours is a long term play.

NPIL is also a major player in the OTC business. Is consolidation inevitable in this business? (NPIL has bought out its JV partner Boots' stake)

OTC is a difficult business and we need to have a basket of products because there is no pull of a doctor. How else do you get the sale? We have to go on television and create that pull. But if there is only one product, the chemist does not want to keep it but if we have a basket of products, it will be like 'Ok these are all Nicholas products' and so stocking will be easier, the supply chain is easier. We believe that the basket is very important for the size of a country like India; which may not be with small countries but definitely India.

In OTC, there cannot be too many new products and we have to count on older products which are doing well. To sell a new product in India is very difficult because of high advertising costs in television and one cannot launch a new product. We have to wait till it makes 10 crore through the ethical route and then go for the switch. Even then those switches have not been well thought of; the jury is out on whether that's a good strategy.

What is your approach to R&D?

In oncology, we have a little bit of a head start because we started in 2002. Our candidate CDK 4 inhibitor stops cells from multiplying too much which is what happens in cancer. The Phase I trial says that it is working quite well. That some people have stable disease means it is not growing. So we are looking forward to next phase.

We are also very lucky because we struck a great luck when we bought a research centre which had huge amounts of natural products in their library of microbes, bacteria and plants which can be used to find a new drug.

Expressing Opinions
No favourites! Our pharma business is much larger the sales are much better about 2,500 crore. The sales in our healthcare business is about 100 crore. This is the new baby which is growing like you know the small baby. The big baby is growing also but slowly. It is large and it cannot grow at that speed.
No patent regime Why do we think that everything will come from the West? Why don't we believe in our own scientists? What dont we believe on our own people? That is something I don't understand.
Pharmacos and heavy margins? It is not true and the money that we make is not from Indian consumers, it is from British and Candian consumers. Our exports are our profits. Many of us keep working in India because they are so strongly Indian.

There have been certain patent issues regarding natural medicines. How are you planning to tackle them?

Unfortunately, in India, we cannot file a patent from plants but we can in the US and Europe. I mean this is strange that I cannot patent something in my own country which will benefit my own people. But I can patent it in US and UK and sell it.

As an Indian company, we can make a drug at much lesser cost. We are telling the Government, but very clearly they don't understand science. At the moment, this is a co-alition. So it has some people who really don't understand science. In section 3D of the Patent Act, look at word 'derivatives'. Codine and Morphine are derivatives. All the diabetes drugs are from the same class. Three different companies have patented three different derivatives because it costs money to take a derivative and bring it to the human beings. It is not a copy. They don't understand chemistry.We are not against generic drugs. But we are saying that,don't throw the baby out of the bath water. By stopping section 3D, we are stopping our own innovation. What sense that does make?

Government seems to be going hard on pharma companies; first DPCO and then NPPA. How does this affect companies like NPIL: which make substantial investment in research?

Just now we have heard another huge issue, which is the NPPA notification, which says that we cannot increase your price by more than 10 percent. The inflation is running at six and if we have to keep our prices at 10 percent, it means that our prices haven't risen on an average. The drugs which are outside price control will be affected as to pay for the drugs which are under price control because the drugs under price control have risen by zero percent which is lower than the cost of inflation. We have to keep up with that. But if we don't, the first to go will be the drugs under price control because there will be increase in shortages as we have no money left to make them. When you cut your wings so much, the bird cannot fly. And that's what is happening in this case and unfortunately there will be shortages.

These policies affect NPIL hard because you have a good focus on domestic business.

We (government) really have poorly thought of policy. They haven't figured out that from this same money we spend on research. They want to take a short term gain of votes but not a long term but not a long term idea of research. Where will we pay for research? There is no government in the world which tells its people to stop research The Government of Singapore is ready for co-funding. They are spending billions in the biopharma area in China. In India we are not allowed to get the best equipment because it comes under defence. What do you do? And you are not even allowed to even charge to the cost of inflation. We are talking about the cement companies they are charging more than the cost of inflation. Everything else has gone up but the pharma companies' prices shall not go up. Cement has gone up, water has gone up, tax has gone up, housing has gone up. We run with people who all use these things.

katya.naidu@expressindia.com